Enough has been written about the
Constitutional Court ruling, the Guptas and the irresponsible and
corrupt behaviour of the president and certain of his ministers to
fill more than one book. Of concern, is the impact that this will
have on our economy and the effect on the average South African.

DEADLINES

Annual
Duty – one calendar month to the day after the incorporation
date

Tax clients should note that unless we receive all
the relevant data and documentation at least fourteen days before
the applicable submission deadline we cannot be held responsible
for any punitive action taken against them by SARS.

Excel
Tips

The ability to give names to sections of a spreadsheet
may prove to be a time saving factor. Let us suppose that a
worksheet consists of a section for the income statement, another
for the balance sheet and still another for the cash flow report.
By assigning those names to the cell range that relates to each
report you will be able to move rapidly from one report to another
and use the feature to print the required report. In earlier
versions of Excel, you need to select the range of cells to which
you wish to assign a name. Then, with the range highlighted, click
on insert, then names and then define. (Alt+I+N+D). In later
versions, CTRL+ALT+F3 has the same effect. Type the name in the
box with a flashing cursor and click OK. Follow those steps for
each section that you wish to name. With your cursor in the box
reflecting the current cell number, click on the red down arrow
next to the cell number. A list of names will appear. Clicking on
a name will take you to that section. What is more, the section
will already be highlighted. By typing ALT+T+S, you can select the
highlighted area as that which you wish to print. Thereafter, you
simply click on the print icon.

TAXATION

Trusts

Presently, taxpayers are
able to transfer property to a trust by way of granting the trust
an interest free loan in order to finance the asset acquisition.
This has the effect of preventing any further increase in the
seller’s estate for estate duty purposes as instead of holding
property, which appreciates in value over time, the seller’s
estate will include the interest free loan capped at the value of
the property at the date of the transfer, less any repayments.
There are even ways to reduce the value of the loan over time thus
denying the state the estate duty on the appreciated value of the
asset transferred. In addition, the interest-free loan mechanism
disguises what, to all intents and purposes, is, in essence a
donation to the trust that should have been subjected to donations
tax under normal circumstances.

To alleviate the loss of
both estate duty and donations tax, it is proposed that interest
free loans are categorized as donations and subject them to 20%
donations tax and, upon the death of the person who transferred
the asset to the trust to include the market value of the asset in
his/her estate for estate duty purposes.

As no amendments to the
Estate Duty Act and to the sections of the Income Tax Act
pertinent to donations have been released, it would be purely
speculation to forecast when these amendments are likely to be
introduced and whether any or all would be introduced
retrospectively. However, it is advisable for those client who
have made such loans to start charging market related interest
thereon but before doing so consider the income tax implications
for both the trust and the individual arising from the inclusion
of such interest in their taxable income.

VAT

When a client has been
subjected to a VAT audit, in the past, a common problem has been
the disallowance of input tax claim on invoices that did not bear
the words “Tax Invoice”. Such disallowance resulted in
penalties and interest being imposed. It also necessitated the
vendor requesting an amended document so that the claim could be
made in a subsequent period.

With effect from 8 January
2016, in terms of amendments to Sections 20 and 21 of the Value
Added Tax Act, this requirement falls away and the expressions
“invoice”, “VAT Invoice” and “Tax Invoice” will be
acceptable. Also removed from the provisions of the Act is the
requirement that these expressions appear “in a prominent
place” on the documents. Similar amendments have been made to
the requirements for debit and credit notes.

The following must still be shown on documents, of a
value in excess of R 5000, thatare to be used to support a claim for input tax:

·The VAT registration number of the supplier

·The VAT registration number of the purchaser, if applicable

·An individualized serial number

·The date of issue of the document

·A description of the goods and services provided

·The quantity or volume of the goods and services provided

·The value of the supply either exclusive or inclusive of VAT

·Where the value of the supply includes VAT, a statement to that effect
and the amount of VAT so included

·Where the value of the supply excludes VAT, the total of the value
exclusive of VAT, the value of the VAT levied thereon and the
aggregate of these two amounts

BUSINESS

Debt collection

Given
the need to contain expenditure as a result of current economic
trends, it is equally important to monitor and effectively control
the granting of credit and, once granted, the compliance with the
terms thereof.

Before granting a credit
facility, it is vital to conduct a thorough investigation into the
applicant’s credit worthiness. This can include requesting the
applicant’s current suppliers to provide a reference, obtaining
a bank reference and obtaining a formal report from an accredited
credit bureau.

Thereafter, if the facility
is granted, it is imperative that the terms thereof are clearly
spelt out, agreed to and complied with. The consequence of any
infringement of the terms must be defined and rigidly applied.

Monitoring compliance may
take various forms. These include:

·Friendly calls and reminders – these are
preferable where the client is a regular and important customer
and one who has not regularly abused the facility. Such calls may
be the responsibility of a designated member of the accounts
department.

·Withholding supply of goods or services – the
exercise of this option should be by someone higher up the
management tree and someone who is familiar with the client,
his/her likely reaction and the impact on and importance of any
future relationship.

·The legal approach – The cost effectiveness of
this approach should be considered before committing to this line
of action. Legal services are costly and the decision to take such
action should not be taken as a purely punitive measure if it is
unlikely to result in a cost effective result. The first step is
for the attorney to issue a letter of demand. Thereafter, the
lawyer should be required to obtain your consent before each
escalation of action.

·Issue of summons – Whilst not too costly in
itself, it will lead to steps that will result in higher costs.

·Liquidation – this step should only be considered
when the amount concerned is significant, the loss will have a
dire consequence for your business and is likely to provide a
reasonable percentage recovery.

ECONOMY

Not
much has been written in recent months of how the economy was
faring pre-Nenegate. Suffice is to say that, although not
approaching free-fall, inflation was already hitting the pockets
of the man in the street.

In
the past few months, political matters have caused a considerable
weakening of the rand and a consequent erosion of the buying power
of Mr and Mrs Citizen. An upside to this has been a rise in
savings that, to some extent, has been influenced by the touting
of tax-free savings products arising from the 2014 budget. It is
hoped that this trend continues. However, most commentators
consider that unlikely as the ever-present threat of down-grading
of the country’s investment status hangs over our heads.

Whether
or not this happens is largely dependant upon the actions of the
ruling party and its government. Certainly, the non-apology and
comments by the ANC Secretary-General and the Speaker of
Parliament do not negate the potential for a downgrade. Possibly
the question is when and not if it will happen.

The
actions of three banks and KPMG regarding the Guptas may have
instilled some confidence in investors and rating agencies but it
remains the responsibility of Gwede Mantashe to expedite his
investigation of the alleged “state-capture” and to take
action against that family and persons within his party found to
have any significant involvement. An effective action in this
regard may result in an improvement to the country’s credit
standing and thus investor confidence.

Meanwhile,
as the strike season approaches organised commerce and industry
need to do their utmost to avoid to breakdowns in negotiations
that can lead to violent demonstrations. Such events, including
those against a lack of service delivery, most certainly detract
from South Africa’s attractiveness as an investment destination.

In
the meantime, we should all be making a concerted effort of
tighten our belts.

On
a positive note, there are signs that the Chinese economy is
showing signs of stabilizing and this augers well for our export
orientated industries. In addition, the rand has strengthened
marginally against the dollar due to the influence of US economic
data.

TAILPIECE

“What
I fear is that the liberators emerge as elitists .. who drive
around in Mercedes Benz and use the resources of this country.. to
live in palaces and gather riches” – Chris Hani – did he
have a crystal ball?